Egypt ETFs Lure Investors In Droves
February 1st, 2011 at 11:00am by Tom Lydon
The Egyptian economy is said to be all but shut down as its citizens stage a revolution. That hasn’t stopped investors from piling into the Market Vectors Egypt (NYSEArca: EGPT) exchange traded fund (ETF).
You’d think the last place an investor would want to be is in a country that’s seen chaos reign in the streets and its stock market shut down, but there you have it.
Despite an eruption of turmoil on the streets of Cairo, trading volume in EGPT has surged massively. Yesterday, more than 800,000 units were traded, says The Wall Street Journal. The normal volume is more like 10,000 a day.
Even more odd: Egypt’s stock market has been closed since Thursday, and Van Eck yesterday stopped issuing new creation units because it can’t accurately price the underlying securities.
And if that’s not strange enough, investors have paid as much as a 13% premium to own the fund.
EGPT isn’t the only Egypt-heavy ETF that’s seen its trading volume spike, either:
- Market Vectors-Africa (NYSEArca: AFK): has an 18.6% allocation to Egypt; its trading volume jumped 20% yesterday
- PowerShares MENA Frontier Countries (NYSEArca: PMNA): has an 18.9% allocation to Egypt; trading volume rose 34% yesterday
- Guggenheim Frontier Markets (NYSEArca: FRN): has a 13.2% allocation to Egypt; trading volume rose 70% yesterday
- WisdomTree Middle East Dividend (NYSEArca: GULF): has a 10.6% allocation to Egypt; trading volume rose 63.5% yesterday
All this interest comes even as the Egyptian economy approaches close to paralysis, says The New York Times. Tourists are fleeing, banks are closed, many employers can’t pay their workers, food isn’t getting to the stores, a ratings agency has cut Egypt’s bond rating and foreign workers are being urged to go home or leave the country.
EGPT may be defying the odds right now – it’s up nearly 3% so far today – if the protests drag on much longer, it could eventually have a more pronounced and negative effect. Already in the last 10 days, it’s lost more than 14%.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.